Chamanlal Setia

Chamanlal Setia achieved a revenue of INR 1,500 crores in FY25, marking an 11-12% volume growth year-on-year. This growth was primarily driven by the operationalization of two out of three new units in Karnal, which contributed an additional INR 140 crores to the revenue. The company's strategy of expanding its infrastructure and customer base, even at lower initial margins, supported this top-line expansion.

The company's profitability in FY25 was significantly impacted by external factors. Ocean freight costs doubled due to geopolitical issues, though they have now reduced substantially (e.g., Sokhna, Egypt freight dropped from $1,800 to $450). Additionally, rice prices opened 15-20% lower this year and remained stable or declined for much of the period. These factors led to margin pressure, with gross margins decreasing from 31% five years ago to 22% currently, although EBITDA margins remained relatively stable around 10%.

Management clarified its strategy of sometimes compromising on margins to acquire new customers and penetrate new markets. This involves working at lower profitability (e.g., INR 1-2 per kilogram) or even at a loss for initial deals, with the expectation of increasing margins once customer relationships are established. This approach is seen as necessary for expanding revenue and market share, particularly with large buyers who offer continuity.

The company has recently added three new units in Karnal, with two currently operating at 60-70% efficiency and the third expected to be fully operational within a month. The new Gandhidham plant is also ready for inauguration and is projected to double capacity in that region. These capacity additions are central to the company's target of achieving INR 2,000 crores in revenue for FY26.

Chamanlal Setia is focusing on building its Maharani brand in the domestic market, starting with online sales through platforms like Blinkit and Amazon. The initial focus is on the NCR region, with sales gradually increasing. The strategy is to establish brand recognition through online channels before expanding to broader distribution networks and advertising. A new distributor for Maharani was also appointed in Australia.

The company is exploring new product categories, such as 'quick cooking rice,' which is currently in the lab stage and awaiting commercial production. Additionally, there's a new market opportunity emerging in Japan for low amylose/sticky rice, with a Japanese delegation having visited the company's facilities, indicating potential for future exports in this specialized segment.

Management noted that India holds a competitive advantage over Pakistan in rice exports, with Pakistan's prices currently $100-150 higher. Long-term geopolitical factors, particularly regarding water sharing, could further impact Pakistan's agricultural output, potentially making it an importer of rice and benefiting Indian exporters. The company's business model, primarily serving ethnic customers, provides resilience against US tariff systems.